GLOBAL RANKINGS: Australia - The PR industry down under is feelingthe pinch, although specialists are finding ways to thrive

PR in post-Olympics Australia has taken a dive. Most of the major

network agencies have laid off staff, clients are less inclined to green

light projects, and there are indications of discounting by some to win

new business.The technology meltdown hasn't hit the local market as hard

as it has in North America, but it is contributing to widespread

sobriety about growth for the next six months and into 2002. The first

half of 2000 was boom time in the lead-up to the Olympics, but by

December of last year, many PR practices were getting their first

indications of a slowdown. The past three months have confirmed it, but

that hasn't stopped several international acquisitions and mergers.



Burson-Marsteller's fortunes are fairly typical of the market as a

whole.



Burson chief executive Varina Nissen says that although the agency's

overall income growth for the 12 months to December 2000 rose 20%, the

first half of 2001 has brought a drop in growth of "negative single

digits." For the full calendar, she expects a rise of about 6%. "In

early July, I would have said it would improve in the fourth quarter,

but the last couple of weeks suggest it's going to be flat for the rest

of 2000," Nissen says. "My only concern is it potentially could be flat

for 2002."



Turnbull Porter Novelli chairman Noel Turnbull agrees: "The market is

tougher than it has been for a decade," he says. "The outlook is

entirely dependent on the global economic outlook. It's finely poised.

The difference is we've been through 10 years in which the biggest

problem has been finding staff. Now companies are laying people

off."



Outside of the tech downturn and the effect of a softening global

economy, other growth-limiting factors for Australian business include a

massive overhaul of the tax system (to a broad-based 10% consumption

tax) and a falloff after the Olympic boom. Corporate reputation work,

technology, corporate finance, and overall mergers and acquisitions

activity have gone soft. Burson, Hill & Knowlton, Edelman, and Weber

Shandwick have all made layoffs, and Turnbull Porter Novelli is not

replacing staff.



Burson and H&K have closed their offices in Canberra, the capital city,

and are using their Sydney and Melbourne offices for servicing federal

government business and lobbying.



"Our Sydney office experienced a bit of a downturn after the Olympics,

which is to be expected," says H&K's joint managing director Greg

Ray.



"February to May has been pretty slow, but we have been picking up some

good business in the past six weeks or so." Another head of an

international agency network (who did not want to be named) said the

decline in new business and existing budgets had forced the big players

to scramble.



"With all this shaking out, there is no clear-cut positioning for market

leaders. Everyone is chasing everything, and no one is establishing

themselves with a dominant position in any sector of the market."



There are still bright spots, however. Many point to healthcare, issues

management, government projects, internal communications, and marketing

communications as remaining strong, although the latter sector is

unsteady within some agencies. "A lot of companies are starting to see

changes in the economy, and are asking us to help advise on issues like

factory shutdowns and (layoffs)," says Edelman managing director Jill

Collins.



Like many of her rivals, Collins also says there is growing work

advising companies on the implications for possible changes in the

federal government after an election later this year.



Burson and Edelman say their corporate social responsibility and

grassroots campaigns work is growing strongly, but off a small base.

However, H&K says its new rural and regional affairs practice is faring

well.



Gavin Anderson's chief executive Ian Smith says he has noted a shift to

more project-related work, a notion with which many concur. Gavin

Anderson is one of the few who has continued to benefit from mergers and

acquisition projects and government privatization work.



Ogilvy's re-entry



Ogilvy caused a stir when it re-entered the Australian market in April

2001 after an eight-year absence with a model many local rivals don't

believe will work. After taking minority and majority interests in five

specialist PR firms under the leadership of managing partner and former

Burson chief Chris Savage, it can now lay claim to the top Australian

ranking based on fee income ($20 million). In announcing the

initiative, Ogilvy PR's Asia-Pacific head Matthew Armstrong said it was

the "biggest bet on the power of specialization that the Australian PR

market has ever seen."



The Ogilvy investment covers PR firms in technology (Howorth

Communications), government affairs and lobbying (Parker & Partners),

multicultural marketing (Ethnic Communications), workplace

communications (Impact), and issues management and corporate finance

(Savage & Horrigan). Savage says that each of the independent but

interlinked operations are growing at 30% this year, and that profits

will be up likewise. "It's fascinating what I'm seeing," says Savage.

"The PR market in Australia for the major, traditional one-stop-shop

multinationals is tough. The reality is that where your offer is

genuinely specialized, the market is becoming more sophisticated in

recognizing that that is the offer they want. This is where the major

one-stop shops are really hurting. They might have a couple of practice

areas that are okay, but where they are middle of the road, they aren't

getting the work. The good niche agencies are busier than ever. There is

a difference, though, in so much as we are all now having to be more

aggressive in seeking opportunities."



Two other agencies - PPR, which was bought last year by the Cordiant

group, and one of the last remaining mid-size independents, Royce - talk

similar lines. Royce chief executive Peter Mahon says his company will

grow by 20% this year, and is looking to hire staff. Mahon continues to

move the company into a broader corporate advisory role beyond its

traditional base in media relations.



PPR chief Richard Lazar is doing likewise. He says PPR will show "double

digit" growth this year, although much of it is coming from a wider

offer of communications services. Lazar says much of PPR's growth is

coming from its integrated offer, recently acquiring a sales promotion

agency to bolster its direct marketing, guerrilla marketing, and online

divisions, as well as its traditional PR operation, which includes

internal communications, issues management, technology, and marketing

communications.



Fleishman's majority stake in Stratcom, finalized in April, is the first

direct equity investment the international agency has made in

Australia.



Senior vice president and director Tony Rasmond says the shop has made

no layoffs, and its two key areas of corporate finance and consumer

marketing are still doing well, but with "more pressure."



"Undoubtedly, the labor market has turned right around, but we haven't

been affected yet. We've just put some people on, but everyone has

projects that are not being checked off."



GLOBAL AGENCIES OPERATING IN AUSTRALIA/NZ RANKINGS

AUSTRALIA/NEW ZEALAND

RANK AGENCY NAME INCOME (dollars) %

2000 2000 1999 CHANGE

1 Porter Novelli International 10,796,000 9,160,000 18

2 Hill & Knowlton 7,132,000 6,735,000 6

3 Burson-Marsteller 7,061,000 6,083,000 16

4 Cordiant 6,774,000 5,229,000 30

5 Weber Shandwick Worldwide 5,487,000 6,122,000 -10

6 Edelman Public Relations

Worldwide 5,221,832 2,591,748 101

7 Rowland Communications Worldwide 2,543,000 4,013,000 -37

8 Cohn & Wolfe 975,000 546,000 79

9 Text 100 836,591 1,027,949 -19

SOURCES: Council of PR Firms

NOTE: This is a list of global PR firms in Australia. It does not

include local independent.



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